Bayer, the German chemicals group, is topping up its medicine cabinet by buying all of its rival Roche's over-the-counter products, including Rennie indigestion tablets and Redoxon vitamins.

The inventor of Aspirin is paying €2.3bn (£1.8bn) for the portfolio, which Roche is selling to concentrate on its core business of developing prescription drugs.

The deal will form a company with annual sales worth up to £1.6bn, based in the US, at Morristown, New Jersey, with 6,700 employees in 120 countries.

Bayer owns a portfolio that includes stomach settler Alka-Seltzer and the One-A-Day range of vitamins. It said yesterday the Roche deal would allow it to "leverage the capabilities, reputation, and strong brands of both companies to create a world-leading OTC company".

The German firm is emerging from a difficult few years. It has struggled to invent blockbuster drugs while meeting the costs of multimillion dollar damage claims over its cholesterol-buster, Baycol, which had to be withdrawn from the market in 2001 and has been linked with 100 deaths.

Yesterday's deal was the latest stage in a restructuring plan - Bayer announced last week it would spin off its chemicals arm into a separate business, to be called Lanxess.

The group hopes the purchase of Roche's OTC brands will pep up its healthcare business and generate synergies of up to £80m "gradually" over the next three years, after it has absorbed a one-off restructuring charge of £200m over the next 12 months.

Roche's withdrawal from selling vitamins and indigestion pills will mark the end of more than a century in the over-the-counter drugs business. It began by selling a cough syrup called Sirolin in 1898 and launched a series of high-profile brands including energy supplement Beroccca and Redoxon vitamins.

The reputation of its vitamins business was damaged by a price-fixing scandal that led to a heavy fine from the European commission in 2001. Roche has since focused on developing new drugs for cancer.

In a separate announcement, Roche said GlaxoSmithKline had bought the rights to sell its obesity drug, Xenical, as an over-the-counter treatment in the US. Analysts believe it could be up to five years before the drug is ready to go on sale in chemists, but Jack Ziegler, the head of GSK's consumer division, said he was "very pleased" with the deal.

GSK, which had been rumoured as a potential buyer for the whole OTC business, will give Roche £56m upfront for the rights to Xenical, plus a series of "milestone" payments, and royalties once the drug is available over the counter.

The switch from prescription-only availability will require the approval of the food and drug administration, but both firms hope to cash in on the "obesity epidemic" that is seen as a mounting public health problem, especially in America.